The Fall of Tech

What a difference a quarter makes. Apple ( AAPL) and Google ( GOOG), which together accounted for around 70% of the Nasdaq 100's performance in the third quarter, have both been under pressure in the current one. Apple shares have lost some 10% since peaking at just above $700. Google had its own debacle Thursday when a glitch caused earnings to be released in the middle of the trading day. To add insult to injury, the company missed on the top and the bottom lines. The stock plunged some 60 points for the day.

These come on top of significant misses and poor guidance from IBM ( IBM) and Intel ( INTC). Microsoft ( MSFT) is unlikely to do anything to help the market, either, after its postbell earnings report Thursday. In short, large-cap tech is not doing anything right now to impress investors, and money is rotating out of the sector.

Hopefully Apple will help change the sentiment and momentum of the sector with its report, which is scheduled for next week. I believe Apple could provide a positive surprise, given the currently muted expectations on the stock. I am currently underweight the tech sector, and will remain so until we start to see better news out of the leading lights in this space.

In contrast with technology, energy-infrastructure stocks have behaved very well over the last 10 trading days. Both Fluor ( FLR) and KBR ( KBR) have risen some 5% since I profiled them earlier this month. Foster Wheeler ( FWLT) has performed even better, achieving a more-than-30% return since I wrote about it at the end of July. I believe this momentum will continue within the broader sector and in these particular stocks, and that it could also spill over to the overall construction-and-engineering-services area. One stock I like here is Jacobs Engineering ( JEC). It's less dependent on the energy sector than my previous picks are, with the space generating about 30% of revenue, but the shares appear undervalued here nonetheless.

Jacobs Engineering provides technical, professional and construction services to various industrial, commercial and governmental clients worldwide. Here are four reasons the stock offers solid value at just over $40 a share:

Earnings growth is picking up. The company booked $2.60 a share in earnings for fiscal 2011 and is tracking to earn just over $2.90 a share in 2012. Consensus earnings estimates for 2013 are currently projected to be more than $3.30 a share.

The stock is selling near the bottom of its five-year valuation range, based on its price-to-earnings, price-to-sales, price-to-book and price-to-cash-flow ratios.

The median price target on Jacobs is $50 a share, per the 14 analysts that cover the company. Standard & Poor's has a "Buy" rating on the stock and recently raised its price target by $4 to $50.

Revenue growth is projected to accelerate by more than 10% in fiscal 2013 after around a 6% increase in 2012. Jacobs shares sell for less than 13x forward earnings, a discount to their five-year average of 16.5x.

At the time of publication, Jensen was long AAPL, FLR, FLWT and KBR, although positions can change at any time.